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Should You Invest In The Austin Real Estate Market?

Austin, TX Real Estate Market Overview

Austin is the capital of Texas and it is growing at a fast clip. The Austin housing market isn’t the largest in the state of Teaxs, but there are a number of reasons to consider buying real estate in this city. The Austin real estate market has gained a lot of steam, with home values almost doubling since 2010. The Austin real estate market isn’t as big as Dallas, San Antonio or Houston. (Austin is only the fourth largest city in the state.) However, the Austin housing market is sizable – it is the eleventh largest city in the U.S. as of this writing, and it is the center of a large metro area. Austin has come up as another tech hub in last 5 to 6 years. There are tons of high paying tech jobs moved to Austin in last couple of years. The Austin-Round Rock metro area is home to about two million people. Recently Austin was ranked eighth for the best real estate markets, topping all other big Texas cities. Since the local economy is growing rapidly, Austin’s housing market is also booming in 2018.

austin real estate market

Austin Real Estate Market Trends And Forecast 2018

The median home value in Austin is $350,200. According to Zillows.com’s statistics, Austin home values have gone up 7.9% over the past year and Zillow predicts they will rise 1.8% within the next year. The median list price per square foot in Austin is $214, which is higher than the Austin-Round Rock Metro average of $156. The median price of homes currently listed in Austin is $399,000. The median rent price in Austin is $1,700, which is higher than the Austin-Round Rock Metro median of $1,695.

austin real estate market forecast

Graph Courtesy – Zillow.com

Is Austin Real Estate Market In A Bubble?

Would Austin remain as one of the top real estate markets in the country or would the bubble burst? Well, Austin isn’t considered to be in a real estate bubble because the demand is consistently high and inventory is very tight. This is good news for investors because you can expect steady activity and flow of people looking for housing. They are either renting or buying homes, and the most recent market reports for area apartments and for sale housing indicate continued strength in these sectors.

Despite the Austin metro area’s red-hot real estate market, sales did see a dip in June 2018. On July 17, the Austin Board of Realtors released its June 2018 Market Report, detailing an interesting trend within the Austin market. The single family home sales in the Austin-Round Rock Metropolitan Statistical Area (MSA) experienced strong and steady growth in the first half of this year but declined in June 2018, according to the June & Midyear 2018 Central Texas Housing Market Report released today by the Austin Board of REALTORS.

Austin had lower affordability scores in the past including 1994-1996, 2000 and 2007. The price of Austin properties declined following the 2007 peak while prices remained relatively flat following the 1995 and 2000 peaks. According to a report published in Williamskw.com, Austin will remain a seller’s market. The National Association of Realtors (NAR) suggests a “balanced” market is between 4-6 months of inventory. The entire Austin market is around 2.5 months. Austin inventory levels and number of days a home is listed for sale are increasing, yet not nearly enough for Austin to be a “buyers” market. That is not expected to change. Home prices may increase by 4-6%. Interest rates may increase by 0.5-1% throughout the year.

As Austin is a young city by many standards, Millennials will be the largest buying force in Austin 2018 and this trend should continue in 2019. This is going to be more attractive for the areas being close to neighborhood amenities and close by shopping & hang out spots. Real estate industry experts think that there is a no bubble. Austin’s economy is strong, and varied. Overall there is a huge scarcity of homes for sale in Austin. It just hasn’t kept up with the pace of people moving here.

Austin Home Prices Trend 2018

Latest Austin real estate market trends show a 2% week-over-week rise in average listing price and a -1% drop in median rent per month. A new report from Trulia ranks Austin among 10 U.S. markets where list prices have stalled over the past year.  The Austin-Round Rock metro area ranks second on the list, with a median home price decrease of 3.4 percent over the past year.

Trulia has 4,397 resale and new homes for sale in Austin. These include open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The average house price in Austin is $513,354. The average house rent in Austin is $1,925.

In the first half of the year, area home prices in Austin continued to increase and housing inventory levels slowly declined amidst strong housing demand. The Austin-Round Rock area sold 3,299 single-family homes in the month of June, down from 3,415 in 2017. Even with the decline, however, the median price for a single-family home in Austin still rose 4.9 percent year-over-year to $326,250.

In the city of Austin, single-family home sales in the first half of the year edged upward 1.3 percent year-over-year to 4,757 sales and the median price for a single-family home increased 3 percent to $375,760. During the same period, active listings decreased 10.1 percent to 1,279 listings; new listings decreased 3.9 percent to 6,458 listings; and pending sales rose 2.7 percent to 5,248 sales.

Data by Redfin.com shows that the asking price of homes for sale in Austin has decreased 0.2% since August last year, while the number of homes for sale has decreased 5.4%. There are currently 4092 homes for sale in Austin at a median listing price of $419K. In the past month, 1431 homes have been sold in Austin. In addition to houses in Austin, there were also 1040 condos, 114 townhouses, and 160 multi-family units for sale in Austin last month.

  • The median list price of homes in Austin is $420,000.
  • The median sale price of homes in Austin is $379,000.
  • The median list price per sq ft. is $205.
  • The median sale price per sq ft. is $205.
  • Average number of days on market is 62.

Popular neighborhoods in Austin include Mueller, Barton Hills, Travis Country, Hyde Park, East Austin, Rosedale, Windsor Park, North Austin, West Austin, North Loop, Downtown Austin, Central Austin, Crestview, Allandale, and Old West Austin.

According to Movoto.com, the median list price in Austin is $475,000. The median list price in Austin went up 1% from August to September. Austin’s home resale inventories is 2,920, which decreased 1 percent since August 2018. The median list price per square foot in Austin is $252. August 2018 was $248. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in September.

austin home prices trend

Graph Courtesy – Movoto.com

Austin Downtown Homes For Sale

Downtown Austin is generally considered to range from East Martin Luther King Jr. Boulevard to Lady Bird Lake (north to south), with the eastern and western boundaries being I-35 and North Lamar Boulevard, respectively. According to a report in Austin.curbed.com, the average asking price for Downtown properties is $602 per square foot, ranging from $205 per square foot (a planned single-family Clayton & Little home in Judge’s Hill asking $1.15 million) to $1,500 per square foot (a penthouse at the W Residences designed by Michael Hsu on the market for $3.45 million). The below chart from NeighborhoodX shows price per sq.ft. for homes in Downtown Austin. Last year, the average asking price was $609 per square foot, ranging from $273 per square foot to $1,589 per square foot.

Chart Courtesy – NeighborhoodX Corp

Austin Foreclosures And Short Sales 2018

The percent of delinquent mortgages in Austin is 0.4%, which is lower than the national value of 1.6%. As per RealtyTrac’s statistics, the number of foreclosures for sale in Austin are about 334 which means these properties in Austin, TX are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 1,069. In July, the number of properties that received a foreclosure filing in Austin, TX was 61% lower than the previous month and 33% lower than the same time last year. The number of foreclosures for sale in Austin listed on Zillow are about 82.

Home sales for June 2018 were down 26% compared with the previous month, and up 442% compared with a year ago. The median sales price of a non-distressed home was $225,250. The median sales price of a foreclosure home was $0, or 0% higher than non-distressed home sales. According to a report, the Austin area saw a 65 percent increase in what’s known as foreclosure starts in May 2018 compared with May 2017; that was followed by year-over-year increases of 44 percent and 29 percent in June 2018 and July 2018, respectively. The total number of foreclosure starts in Austin in July 2018 was 126.

What Is The Cost of living In Austin, TX?

Aside from high housing prices, the cost of living in Austin is relatively affordable. Overall, the cost of living for Austin is very reasonable. At three percent below the national average cost of living, moving to Austin may be an economical choice for you. One of the most interesting factors in the cost of living for Austin is that the cost of housing is 15 percent below the national average.

According to Sperling’s Best Places, grocery costs in Austin are slightly below the national average, with a rating of 89.1 against the U.S. average of 100, meaning it is about 11 percent lower than the national average on groceries. The sales tax rate in Austin is 8.25 percent. There are no income taxes in Texas. Schools are largely funded through property taxes, which rise along with home prices. As home prices continue to skyrocket and people are increasingly forced to move to the distant suburbs to find affordable housing, a massive reworking of Austin’s building codes, known as CodeNext, promised to deliver some relief.

The median salary in Austin, TX is $51,596 and it is the 108th most expensive city in a database of 232 cities by NerdWallet.com. For a 2-bedroom apartment the median rent per is $1,184. The median price for 3/2 bedroom house is $276,634. Food and entertainment costs in Austin are reasonable. Redwood Austin is the area with the lowest cost of living.

Top 10 Areas With The Lowest Cost of Living in Austin – (List by Niche.com & prices by Livability.com)

  1. Redwood, Texas – Located in Guadalupe County. The median income in Redwood , TX is $47,778 and the median home value is $54,700.
  2. Lockhart, Texas – Located in Caldwell County. The median income in Lockhart , TX is $48,884 and the median home value is $115,400.
  3. Martindale, Texas – Located in Caldwell County. The median income in Martindale , TX is $43,929 and the median home value is $151,200.
  4. Uhland, Texas – Located in Hays County. The median income in Uhland , TX is $40,662 and the median home value is $78,100.
  5. Taylor, Texas – Located in Williamson County. The median income in Taylor , TX is $42,793 and the median home value is $116,600.
  6. Lago Vista, Texas – Located in Travis County. The median income in Lago Vista , TX is $75,126 and the median home value is $189,400.
  7. Elgin, Texas – Located in Bastrop County. The median income in Elgin , TX is $50,369 and the median home value is $104,000.
  8. Hornsby Bend, Texas – Located in Travis County. The median income in Hornsby Bend , TX is $49,077 and the median home value is $123,000.
  9. Round Rock, Texas – Located in Williamson County. The median income in Round Rock, TX is $72,412 and the median home value is $179,900.
  10. Wimberley, Texas – Located in Hays County. The median income in Wimberley , TX is $59,167 and the median home value is $214,600.

10 Reasons To Invest In The Austin Real Estate Market

Austin is the capital of Texas. The Austin-Round Rock metro area is home to about two million people. The city is known as a haven for live music, free thinking and free spirits. It has a distinct culture and flavor compared to the rest of Texas, which is a mostly conservative and traditional state. According to WalletHub, among large U.S. cities, Austin ranked eighth, topping all other big Texas cities as well as San Jose, California; Atlanta; and Portland, Oregon. Among all 300 cities, Austin still ranked a respectable No. 36 for best real estate markets. Here are the top 10 reasons to invest in the Austin real estate market in 2018 and 2019.

1 The Massive Student Population

Many people want to invest in the Austin real estate market because there is a massive student population that will rent properties for a premium if they’re in easy commuting distance of the University of Texas Austin campus. That school alone has more than 40,000 students. The Austin community college hosts about as many students as UT Austin. Huston Tillotson University, Saint Edward’s University and National American University are also located in this city.

2 Austin Is The Silicon Prairie

Austin Texas has been nicknamed Silicon Hills and Silicon Prairie because they’ve attracted so many high tech employers. This has resulted in an active upscale Austin real estate market. Major local employers include IBM, Amazon, Apple, Cisco Systems and a number of semiconductor manufacturers. There are more than 3300 tech companies in the region and more than 100,000 tech workers all competing for homes in the Austin real estate market.

3 Austin, the Hidden Health Hub

One of the long-term strengths of the Austin is its diverse economy. The Austin real estate market dipped after the layoffs of the Dot-Com boom. They decided to solve the problem by encouraging medical and biotech employers to relocate to the area, too. As of this writing, there are 85 biotech and pharmaceutical companies in Austin.

4 Austin, the State Capital

Texas is unique for having a biannual legislature. They don’t have the state legislature in town year round. Instead, they are only in session several months every two years. This leads to an influx of legislators, reporters and lobbyists every other year. This creates a unique but predictable boom and bust for the Austin housing market in the vicinity of the capital building.

5 Quality of Life

One of the factors driving the Austin real estate market is the intangible but well documented quality of life the city provides. In 2017, US News and World Report ranked the city first for quality of life. In 2016, Austin was ranked first on a Forbes list of Cities of the Future list. In 2017, that same magazine ranked the South River City neighborhood as one of the best for Millennials. WalletHub ranked the city sixth in their list of best places to live in 2017. In 2012, the FBI ranked Austin one of the safest cities in the country.

6 A Relatively Friendly City for Landlords

Texas in general is very landlord friendly, though cities can have their own, stricter ordinances. Texas doesn’t specifically let tenants withhold rent for failure to provide essential services. You can evict someone for nonpayment of rent after three days. Texas doesn’t set a limit on security deposits. Texas doesn’t require a minimum time frame before you increase the rent. For major lease violations, you can terminate the lease then and there and give them three days to vacate. Knowing you won’t spend months trying to evict a non-paying tenant is a good reason to consider the Austin real estate market or another Texas housing market over more liberal cities.

7 The Excellent Tax Environment

Texas’ property taxes may be high, but this is offset by the lack of a state income tax. There is, overall, a low state and local tax burden for investors. That makes this a great place to buy a home and rent it out.

8 Affordable Real Estate

Homes in Austin are 23% cheaper than the national average. It may be the second most expensive housing market in the state with a median home price of around $350,000, but it is still far cheaper than California or New York. Buy up condos or townhomes, and you’ll be able to see a sizable return on the investment. For example, studio apartments rent for around $780 in Austin versus the $700 national average, while an Austin 1 bedroom apartment rents for almost a $1000 though the national average is $825 a month. A three bedroom apartment in Austin rents for $1500-$1600 while the national average is closer to $1400 a month.

9 Positive Demographic Momentum

About half of Austin’s population is between 18 and 44, though that figure is skewed by the large student population. However, the reality is that many college graduates choose to stay here because of the abundant, well-paying jobs. After all, Austin has the highest per capita of high paying jobs of any Texas city. This helps explain why the Austin housing market is growing at the fastest rate of any major city in Texas. Many of these young adults are starting their families here, creating certain future demand for housing in the Austin real estate market.

10 Certain Future Appreciation for Austin Real Estate

An author in Forbes wrote in 2016 that Austin real estate is appreciating at one of the highest rates in the state because of NIMBY-ism, a reluctance to develop riverfront or Texas hill country to build new homes. This has pushed development out along the highway and forced dense development in areas already zoned for housing. This pushes up the price for existing homes, driving many in the Austin housing market to rent when they want to buy, while it guarantees capital gains for those who buy and hold property.

Tips For Investing In Austin, Texas

Investing in real estate is definitely a good idea because real estate offers a unique combination of safety, steady cash flow and strong odds of high capital gains. If you are a beginner in real estate investment business, it very important to read good books on real estate. You must also learn from successful real estate investors who have retired early on in their lives by investing in some of the best real estate markets like Austin, Texas. With Austin, Texas, becoming a more diverse city every year, there are plenty of opportunities to take advantage of – from buying  new homes to different investing options in the Austin real estate market. Austin is a leader across the country with jobs and when you combine that with home prices not as drastically increasing, you’ll get a real estate market that many others envy.

Another housing market to go for is the Salt Lake City real estate market was ranked one of the toughest real estate markets for Millennials due to limited supply relative to demand. While many would like to own a home, affordability is an issue for the young would-be home owner; the average Millennial earns $68,000 a year while the median home price is $400,000. This explains why Salt Lake City has some of the fastest growing rents in the country. Rents in Utah as a whole grew 2.6% year over year, only surpassed by Nevada’s blistering 3.5% increase.

Similarly, Baltimore real estate market is another great market for investment. Amazon has set up several fulfillment centers in Baltimore. They’re taking advantage of Baltimore’s harbor, cheap real estate and transportation links to the rest of the Northeast. Every one of these centers provides more than a thousand jobs, and the Baltimore housing market in their vicinity becomes hot because people move to where there is work. The Baltimore real estate market around the new industrial parks built to cater to Amazon will boom, because we can expect as many jobs from Amazon’s suppliers in those areas as Amazon itself – and those workers will want to live close to work.

Following the housing market decline in 2007, single family rental properties became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.


References

UT Austin / Austin colleges
https://www.usnews.com/best-colleges/university-of-texas-3658
https://www.collegesimply.com/colleges/texas/austin/four-year-colleges/

Austin demographics
https://en.wikipedia.org/wiki/Austin,_Texas

Landlord friendly                                                                                                              http://capstonecapitalusa.com/the-most-friendly-8-landlord-states          https://www.rentcafe.com/blog/renting/states-best-worst-laws-renter

Taxes
https://www.austintexas.gov/invest-here

Home prices
https://www.austintexas.gov/invest-here
https://www.forbes.com/sites/scottbeyer/2016/08/31/why-is-austins-housing-more-expensive-than-other-texas-cities/#10556d3d6121
https://www.bestplaces.net/cost_of_living/city/texas/austin

Cost of Living                                                                                                                https://www.nerdwallet.com/cost-of-living-calculator/city-life/austin                        https://www.tripsavvy.com/austins-cost-of-living-255111                                                            https://livability.com/tx                                                                                                      https://www.niche.com/places-to-live/search/suburbs-with-the-lowest-cost-of-living/m/austin-metro-area

Market Trends and Forecast                                                                                              https://www.zillow.com/austin-tx/home-values                                              https://www.trulia.com/real_estate/Austin-Texas/market-trends    https://www.realtytrac.com/statsandtrends/tx/travis-county/austin                  http://austin.culturemap.com/news/real-estate/08-30-18-austin-home-foreclosures-rise-report http://austin.culturemap.com/news/real-estate/09-11-18-best-real-estate-markets-in-us-austin-wallethub https://www.redfin.com/city/30818/TX/Austin

Is Austin In A Bubble                                                                                                                https://www.quora.com/Is-the-Austin-real-estate-market-a-bubble-If-so-when-will-it-burst https://www.williamskw.com/blog/5-Predictions-for-the-Austin-Real-Estate-Market-in-2018/53486

*Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified.


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